BluePhoenix Solutions (NASDAQ: BPHX), the leader in value-driven legacy
modernization, today announced financial results for the third quarter
of 2012. The turnaround efforts are showing results with revenues
holding steady while debt was reduced and burn rate was brought under
control.

Net Income on a non-GAAP basis for Q3 improved 85% and while the number
still shows a loss of $182 K BPHX is closely approaching breakeven.
Additional achievements in Q3 include the significant reduction in total
financial debt which dropped from $7.9 M to just $556 K. Earnings per
share improved 89% in the third quarter with a non-GAAP loss of $(0.02)
per diluted share, compared to net loss of $(0.18) per diluted share in
the previous quarter. Net cash burn is down 78% in Q3 to only $314 K
compared to $1,416 million in Q2.

Matt Bell, CEO of BluePhoenix said, “We are making great progress on our
plan to restructure the company, strengthen the balance sheet, and sell
off less profitable and non-strategic businesses. Our timing appears
good as the market for our core business is picking up because companies
postponed projects over the last few years. A lack of knowledge in
running legacy systems, higher licensing prices, and a move toward cloud
technology are also fueling our demand.”

BluePhoenix will go over the following numbers during their quarterly
conference call today at 4:30PM Eastern US time. The call can be
accessed by dialing 1-888-668-9141 within the United States, or via
+972-3-9180610 if calling internationally, approximately five minutes
prior to its scheduled commencement. A live Veidan Broadcasting and a
replay can be accessed through a link that will be available via the
BluePhoenix website.

Non-GAAP Results (in thousands US$)

Q3 2012

Q2 2012

Q3/2011 **

Sales

3,978

4,237

6,539

Operating profit (loss)

(89)

(791)

376

Net (Loss) Income

(182)

(1,171)

111

Earnings (Loss) per share, diluted*

(0.02)

(0.18)

0.02

GAAP Results (in thousands US$)

Q3 2012

Q2 2012

Q3 2011

Sales

3,978

4,237

6,539

Operating profit (loss)

(748)

(1,301)

(3,248)

Net loss

(3,686)

(4,108)

(3,206)

Loss per share, diluted*

(0.46)

(0.62)

(0.51)

Notes:

* On December 28, 2011 the company performed a one-for-four reverse
split of its outstanding shares.

** Presented after reclassification of Liacom Ltd. as discontinued
operation.

At present, following the completion of the sale of AppBuilder business,
an amount of $2 million is held in escrow accounts to secure certain
company obligations under the sale agreement.

Non-GAAP financial measures

The release includes non-GAAP diluted earnings per share and other
non-GAAP financial measures, including non-GAAP operating income and
non-GAAP net income. These non-GAAP measures exclude the following items:

Amortization of intangible assets;

Stock-based compensation;

Onetime expenses related to cost saving plan and one time charges;

Revaluation of derivatives and discount amortization;

Gain on sales of subsidiaries and Appbuilder;

Net loss from discontinued operation.

The presentation of these non-GAAP financial measures should be
considered in addition to BluePhoenix' GAAP results and is not intended
to be considered in isolation or as a substitute for the financial
information prepared and presented in accordance with GAAP. BluePhoenix'
management believes that these non-GAAP financial measures provide
meaningful supplemental information regarding its performance by
excluding certain charges and gains that may not be indicative of
BluePhoenix' core business operating results. BluePhoenix believes that
both management and investors benefit from referring to these non-GAAP
financial measures in assessing BluePhoenix' performance. These non-GAAP
financial measures also facilitate comparisons to BluePhoenix'
historical performance. BluePhoenix includes these non-GAAP financial
measures because management believes they are useful to investors in
allowing for greater transparency with respect to supplemental
information used by management in its financial and operational
decision-making. Non-GAAP measures are reconciled to comparable GAAP
measures in the table entitled "Unaudited Reconciliation of GAAP to
Non-GAAP."

About BluePhoenix Solutions

BluePhoenix Solutions Ltd. (NASDAQ: BPHX) is the leading provider of
legacy IT modernization conversion solutions. The BluePhoenix portfolio
includes a comprehensive suite of tools and services from global IT
asset assessment and impact analysis to automated database and
application migration. Leveraging over 20 years of best-practice domain
expertise, BluePhoenix works closely with its customers to ascertain
which assets should be migrated, redeveloped, or wrapped for reuse as
services or business processes, to protect and increase the value of
their business applications and legacy systems with minimized risk and
downtime.

BluePhoenix provides modernization solutions to companies from diverse
industries and vertical markets such as automotive, banking and
financial services, insurance, manufacturing, and retail. BluePhoenix
has 9 offices in the USA, UK, Italy, Romania, Russia, and Israel.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained in this release may be deemed
forward-looking statements within the meaning of the “safe harbor”
provisions of the Private Securities Litigation Reform Act of 1995 and
other Federal Securities laws. You can identify these and other
forward-looking statements by the use of words such as “may,” “will,”
“plans,” “believes,” “estimates,” “expects," “predicts”, “intends,” the
negative of such terms, or other comparable terminology. Because such
statements deal with future events, plans, projections, or future
performance of the Company, they are subject to various risks and
uncertainties that could cause actual results to differ materially from
the Company’s current expectations. These risks and uncertainties
include but are not limited to: the effects of the global economic and
financial trends; market demand for the Company’s products; successful
implementation of the Company’s products; changes in the competitive
landscape, including new competitors or the impact of competitive
pricing and products; and such other risks and uncertainties as
identified in BluePhoenix’s most recent Annual Report on Form 20-F and
other reports filed by it with the SEC. Except as otherwise required by
law, BluePhoenix undertakes no obligation to publicly release any
revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

This press release is also available at www.bphx.com.
All names and trademarks are their owners’ property.

BluePhoenix Solutions Ltd.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Three months ended

Nine months ended

September 30,

September 30,

2012

2011*

2012

2011*

Unaudited

Unaudited

Revenues

$3,978

$6,539

$11,815

$20,736

Cost of revenues

2,234

4,413

8,532

15,690

Gross profit

1,744

2,126

3,283

5,046

Research and development costs

340

1,066

1,255

3,422

Selling, general and administrative expenses

2,253

4,308

7,637

12,097

Gain on sales of subsidiaries and Appbuilder

(101)

-

(346)

-

Total operating expenses

2,492

5,374

8,546

15,519

Operating loss

(748)

(3,248)

(5,263)

(10,473)

Financial expenses, net

2,840

374

5,335

765

Other income

-

-

(580)

-

Loss before taxes

(3,588)

(3,622)

(10,018)

(11,238)

Taxes on income

28

23

174

78

Net loss from continued operation

(3,616)

(3,645)

(10,192)

(11,316)

Net loss (profit) from discontinued operation

-

(276)

673

(97)

Net loss

(3,616)

(3,369)

(10,865)

(11,219)

Net result attributable to noncontrolling interests

70

(163)

175

(121)

Loss attributed to BluePhoenix shareholders

($3,686)

($3,206)

($11,040)

($11,098)

Loss per share:

From continued operation- basic and diluted

($0.46)

($0.56)

($1.48)

($1.83)

From discontinued operation- basic and diluted

$ 0.00

$ 0.05

($0.10)

$ 0.02

Attritubed to the shareholders

($0.46)

($0.51)

($1.58)

($1.81)

Shares used in per share calculation:

Basic and diluted **

7,972

6,235

7,006

6,122

* Presented after reclassification of Liacom Ltd. as discontinued
operation.

** On December 28, 2011 the company performed a one-for-four reverse
split of its outstanding shares.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(In thousands, except per share data)

Three months ended

Nine months ended

September 30,

September 30,

2012

2011

2012

2011

Unaudited

Unaudited

GAAP Gross Profit

$1,744

$2,126

$3,283

$5,046

Amortization of intangible assets

317

886

1,265

2,950

Expenses related to cost saving planand one time charges

-

913

36

4,237

Non-GAAP gross profit

$2,061

$3,925

$4,584

$12,233

GAAP operating loss

($748)

($3,248)

($5,263)

($10,473)

Amortization of intangible assets

317

886

1,265

2,950

Expenses related to cost saving planand one time charges

-

2,433

87

9,337

Stock-based compensation

443

305

1,408

947

Gain on sales of subsidiaries and Appbuilder

(101)

-

(346)

-

Non-GAAP operating income (loss)

($89)

$376

($2,849)

$2,761

GAAP Net loss attributable to BluePhoenix

($3,686)

($3,206)

($11,040)

($11,098)

Amortization of intangible assets

317

886

1,265

2,950

Expenses related to cost saving planand one time charges

-

2,433

87

9,337

Stock-based compensation

443

305

1,408

947

Gain on sales of subsidiaries and Appbuilder

(101)

-

(346)

-

Revaluation of derivatives and discount amortization

2,845

(31)

4,824

(288)

Net loss from discontinued operation

-

(276)

673

(97)

Non-GAAP Net income (loss) attributable to BluePhoenix

($182)

$111

($3,129)

$1,751

Shares used in diluted earnings per share calculation

7,972

6,252

7,006

6,224

Non - GAAP Diluted Earnings per share

($0.02)

$0.02

($0.45)

$0.28

BluePhoenix Solutions Ltd.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

September 30,

December 31,

2012

2011*

Unaudited

ASSETS

Current Assets:

Cash and cash equivalents

$1,925

$3,997

Restricted cash

79

-

Trade accounts receivable, net

2,992

7,675

Other current assets

642

1,041

Total Current Assets

5,638

12,713

Non-Current Assets:

Restricted cash

-

3,428

Property and equipment, net

648

1,021

Goodwill

12,501

14,238

Intangible assets and other, net

755

3,000

Total Non-Current Assets

13,904

21,687

TOTAL ASSETS

$19,542

$34,400

LIABILITIES AND EQUITY

Current Liabilities:

Short-term bank credit

$275

$6,983

Trade accounts payable

1,418

3,403

Deferred revenues

571

739

Other current liabilities

1,206

3,272

Total Current Liabilities

3,470

14,397

Non-Current Liabilities

Accrued severance pay, net

425

410

Loans from banks and others

281

3,945

Derivative liabilities - Warrants

326

53

Total Non-Current Liabilities

1,032

4,408

Total Equity

15,040

15,595

TOTAL LIABILITIES AND EQUITY

$19,542

$34,400

* Presented after reclassification of Liacom Ltd. as discontinued
operation.

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